China made its biggest purchase ever of US corn in another boost to meeting agriculture targets set in the countries’ “phase one” trade accord.
The US Department of Agriculture on Tuesday said that exporters sold 1.762 million tonnes of corn, the fourth-biggest spot deal ever for the grain.
The agency on Friday last week reported a sale of 1.365 million tonnes to China.
China is poised to meet or surpass import quotas set by the WTO for 7.2 million tonnes of corn from any country in a year. Beijing issued a new batch of permits that allow imports at lower tariffs.
The nation agreed to buy US$36.5 billion in agricultural commodities this year from the US as part of the trade accord, up from US$24 billion in 2017.
The buying spree of US agricultural products could help US President Donald Trump shore up support from farmers ahead of the November presidential election.
The farming sector is crucial to maintain farm and rust-belt states that carried him to victory four years ago.
US farmers have received billions in aid payments after crop, meat and other farm-product exports declined in 2018 as a US-China trade dispute worsened.
“Right now, the purchases give the president something concrete to talk about in helping corn belt crop farmers, but I think the impact politically is pretty marginal at this point,” University of Illinois agriculture economist Scott Irwin said in a message.
Tensions were also flaring between the US and China, potentially threatening the trade accord.
At a news conference at the White House on Tuesday, Trump said he issued an order to end Hong Kong’s special status with the US and signed legislation that would sanction Chinese officials responsible for cracking down on political dissent in Hong Kong.
He has no plans to speak to Chinese President Xi Jinping (習近平), Trump added.
He also said there have been increased Chinese agricultural purchases.
“A lot of people ask, how are they doing on the trade deal?” Trump said. “Well, they’re buying a lot.”
That follows Trump’s statement last week that he was not considering a second phase to the trade deal.
For US farmers, ample grain supplies, lackluster demand and relatively benign weather for crops have pressured prices for Chicago corn futures, despite the record sales to China.
“The key is whether the purchases lift grain prices off of recent lows for a sustained period of time,” Irwin said. “This looks to be tough to do right now, because rains are improving the outlook for yields at the same time.”
China’s imports of other raw materials from crude oil to soybeans surged last month as the economy started to recover from the worst of the COVID-19 pandemic.
In the US, virus cases are rising and commodity markets are under pressure from limited demand for feed and fuel.
The huge export sales have a more modest impact on corn futures than normal, with grain inventories rising faster than consumption.
“China would need to buy five times this amount just to get us close to the carryover we currently have,” said John Payne, a senior futures and options broker at Daniels Trading in Chicago. “This is a positive development, though.”
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